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The Actuary The magazine of the Institute & Faculty of Actuaries

Profession welcomes personal injury referral fees ban

The Actuarial Profession said that it has been undertaking research in this area for several years which demonstrated a clear correlation between the growth of claims management companies and the increase in personal injury claims resulting from motor accident insurance claims.

The research has consistently identified high levels of personal injury claims as a key inflationary driver for the motor insurance industry. And, as costs to the industry rise, so do premiums. Figures from the Confused.com/Towers Watson Car Insurance Price Index shows consumers paying 25% more for comprehensive car insurance than they did a year ago.

David Brown, of the Actuarial Profession, said: "In November last year, we gave evidence to the Transport Select Committee's enquiry into the costs of motor insurance and made the link between claims management companies and the rising costs of motor insurance clear to MPs. We are pleased that the Ministry of Justice is taking action in this area.

"It remains to be seen to what degree this decision will reverse the trends in bodily injury claims costs. With FSA returns showing that £1.24 was paid out in claims and expenses for every £1 of premium collected in 2010, there is some way to go before insurance companies stop losing money in this area, and so it seems unlikely that premium increases are yet a thing of the past. However, at a time when motorists are increasingly feeling the pinch, today's decision will certainly help reduce the upwards pressure on rates, and is to be welcomed."